Home Daily Commentaries Aussie dollar trades back below 64 US cents

Aussie dollar trades back below 64 US cents

Wednesday 2 November, 2022

Daily Currency Update

The Aussie dollar is weaker this morning when valued against the Greenback.  The AUD/USD slid for the fourth consecutive day, courtesy of broad US Dollar strength, after manufacturing activity in the United States flashed the economy’s resilience, albeit that the Reserve Bank of Australia (RBA) lifted rates by 25 bps, which bolstered the AUD ahead of the US session. At the time of writing, the AUD/USD is trading at 0.6387.  Yesterday the Reserve Bank governor Phillip Lowe sent an ominous warning that the cash rate will keep rising as long as inflation continues its own upward trajectory.  The RBA raised its cash rate by 25bps again to 2.85%, as widely expected by most, although there was a chance of a step back up to 50bps. The outlook statement showed an intent to move in baby 25bps steps from here, even with inflation remaining above the top of its 2-3% target range by the end of 2024. Given that quarterly inflation rose by 7.3%, the RBAs acknowledged that monetary policy operates with a lag, so the path of slowing from 50bps to 25bps would allow the RBA to assess consumer spending amidst an uncertain global economic outlook. NZD/AUD has continued to push higher and sits at a 5-month high of 0.9140. On the data front today we will see the release of monthly Building Approvals.

Key Movers

Overnight the market sentiment remains downbeat, as shown by US equities trading with losses. The ISM Manufacturing report for October was better than forecasts at 50.2 vs. 50 estimated, while a subcomponent that measures prices fell to more than a two-year low. Meanwhile, an earlier report was a prelude for ISM data, with S&P Global PMI Manufacturing Index for the same period slowed. Still, it was above estimates of 49.9, at 50.4, but below the September figure. Also, the US Labor Department revealed September’s stronger than expected US JOLTS data, which unexpectedly rose above estimates of 10M to 10.717M, topping August’s 10.28M. All eyes will now be on the Federal Open Market Committee (FOMC) meeting. Market expectations are firmly behind a fourth consecutive 75bp interest rate hike from the Federal Reserve. The key story is whether the Fed opens the door to a slower pace thereafter or if the hawks’ focus on core inflation momentum signals a fifth 75bp move in December.

Expected Ranges

  • AUD/USD: 0.6300 - 0.6500 ▼
  • AUD/EUR: 0.6400 - 0.6600 ▼
  • GBP/AUD: 1.7850 - 1.8050 ▲
  • AUD/NZD: 1.0850 - 1.1050 ▼
  • AUD/CAD: 0.8600 - 0.8800 ▼